Senate Majority Leader Harry Reid said yesterday he had a “productive conversation” with Minority Leader Mitch McConnell without reaching a conclusion on a plan to send to the Democratic-controlled chamber for a vote.
“Given the fiscal shenanigans, we could go through several months of dull data, especially if we get just a short-term fix,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “The euro could maybe get up toward $1.40 on the basis that the market will be looking for an alternative to the dollar and a recovery is occurring modestly in Europe.”
The euro last traded at $1.40 in October 2011.
Policy makers from Japan, India, Russia and Saudi Arabia expressed faith in the ability of the U.S. to pay its bills as the potential for default dominated the annual meetings of the International Monetary Fund and World Bank, which ended yesterday in Washington. The wrangling led strategists to cut their forecasts for the dollar for a third straight month in October, the longest stretch this year.
“Everyone’s just assuming that the U.S. cannot default, which is a rather dangerous assumption to make, but nonetheless markets are making it,” said Geoffrey Yu, a senior foreign- exchange strategist at UBS AG in London. “People don’t want to have a position on, because they know it’s going to be resolved at some point.”
The dollar has declined 1.2% in the past month, according to Bloomberg Correlation Weighted Indexes that track 10 developed-country currencies. The euro gained 1% and the yen climbed 0.2%.